What VCs Look for in a Startup – Interview with Vince Thompson

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Episode Summary

Vince Thompson is the Founder of Middle Shift and an advisor for several startup companies such as Contract Cloud and Jukin Media. Early in his career, Vince lead the advertising sales organization for AOL and later went on to serve as Facebook’s first head of national sales in 2005. Learn more about how to find the right advisor for your company and what Vince looks for in his pitch on this week’s episode.

What VCs Look for in a Startup – Interview with Vince Thompson

Hi. Welcome to The Successful Pitch Podcast. I’m thrilled to have Vince Thompson on as our guest today. Vince is a consultant and author, specializing in revenue generation and business creation. Through his LA Consulting firm, Middleshift, he and his partners have helped a variety of companies and highly profile early stage ventures achieve revenue success and scale. Among them, GumGum, TV Guide, Michael Eisner’s Vuguru, I believe is how you pronounce that. We’ll find out for sure if I was right or not.

Prior to Middleshift, Vince was an early executive at AOL and Facebook. He’s the author of a great book that I personally have read called, Ignited. I highly recommend that. Graduated USC Annenberg School and Pepperdine. He’s just an all-around guru and wiz and nice guy. Vince, welcome to the show.

Thank you, John. Fun to be here.

I always like to tell our listeners a little bit more about who the guest is beyond what I just said. Would you mind taking us back to your days at AOL and Facebook? How did you get into that world back in 1998 and 2005?

I’m a sales guy, so starting there. I have been attracted to interesting media opportunities since the earliest days. As a kid, I worked in radio. When I went to USC, I wrote screenplays and I got some things in developments. I went in the TV business at the station level in the pre-internet days. When the internet started happening, I got really excited about it.

I got a line in 1994 … Probably ’92 on Prodigy, but ’94 on AOL. I really started seeing the promise of it with the browser that Netscape had created. It was Mosaic then. I tried to get in the business. I couldn’t get in for a few years, they didn’t know what to do with a local TV ad sales guy who wanted to work in the internet business because the internet was not an ad supported thing.

TSP 081 | What VCs look for

What VCs look for: I’m a sales guy. I have been attracted to interesting media opportunities since the earliest days.

In 1998, I got a job at a really neat place, Third Age, south of market in San Francisco, just down the street from Wired, back in the days when people were trying to figure out how big ad banner should be, how many pixels and what’s that thing going to look like. We’re all trying to figure it out.

I had written an article for a publication called, at that time, Electronic Media. Today it’s called, Television Week, I believe. It was an article that I wrote as a guest commentary talking about how exciting the internet business was and how great it was and creative. Unlike the television business that as you moved up in the ranks, it became more about math and ratings and numbers. The internet was wide open with creative possibilities for marketers.

I wrote that piece about how excited I was to be in the business. A great guy at AOL, Charlie Warner, who was consulting Bob Pittman in helping build the company, ripped it out. I guess they had talked about it and said, “Hey, here’s a guy who’s super excited about the internet and AOL needs somebody in the West.” It just lead to a great opportunity for me. That’s how I got in.

A great story that is. We talk about now the importance of having a digital footprint and creating your own brand and blogging and posting. But way back then, nobody was doing that. That’s what got you in the door. I love that story.

I often tell people when I’m talking to students, it’s not the things you do during your day job that get you your next opportunity, it’s the things you do after hours. It’s exactly that. It’s having a voice, it’s blogging, it’s showing up at events, it’s hustling around. It’s those extra things that lead to your next opportunity. It certainly did for me in a really big way.

[Tweet “What VCs look for: It’s things you do after hours that gets you opportunities..”]

That’s great. I can’t let you go without talking a little bit, because everyone’s always so fascinated about, what was it like to work at Facebook in 2005?

It was fascinating. You could see the vision that Zuckerberg had then. Just an incredibly brilliant guy, committed to the single vision of connecting the world socially and changing the way that people interact and really facilitating relationships and using software and the internet as a platform to do it. I got involved with the company in 2005. I went for a job interview. Literally, there was about 20 employees, maybe a few less. They literally had a sandwich board out front the office, just off the university in Palo Alto. On it said, “Hiring,” and one of the jobs was VP sales.

A sandwich board instead of online advertising for a position like that.

They may have done that too. Sean Parker had contacted me via LinkedIn and asked me to come in and interview for the position. It was a small company with a big vision. It was a fun experience, it’s fun being there.

Now, has working at AOL and Facebook given you some really key insights as to what you now, as an investor, look for in a startup? Has it helped you be able to say, “Ah, this reminds me of AOL or this reminds of Facebook. I can see that this is the right team to execute this idea.”

I think both of them were formative for me. My tenure at Facebook was very short, but I had come out of a really big company. I’ve been at AOL, which was massive. In the brief time I was at Facebook, I got a deeper insight into the startup culture and how fast things needed to move, how innovations … 24/7. That was informative in that regard.

TSP 081 | What VCs look for

What VCs look for: I got to see a lot of stuff that, in the first version failed, but we see it successful today.

AOL was a big company and innovative in many, many ways. But it was bureaucratic as well. All of that said, I learned a ton at AOL about building products and companies to meet the needs of a variety of markets. AOL started just by putting people on the internet. But then just building solutions, partnering or you’re building solutions for people to address all of their potential needs online and offline. There was a moment of time where the company was so incredibly hot, it was able to attract all these super talented people.

There are literally hundreds of businesses and I got to look at so many of them when I was there. I got to meet with people who were product managers and internal entrepreneurs on a regular basis, and see how they identified markets, how they’re working to address markets. I got to see some really interesting products being created.

I got to see a lot of stuff that, in the first version failed, but we see it successful today. A lot of these ideas are forged out of many, many, many people trying and trying and trying and trying. At some point, the market timing is right and the resources are in line, and you find yourself in the big success. It’s all hard fought.

[Tweet “What VCs look for: Successful ideas are forged out people trying and trying.”]

Let’s talk about three of the companies that you invested in and are also an adviser on, because I think our listeners would love to hear the story of how those founders found you to be both an investor and an adviser. Does that sound good?

Sure. I don’t what companies you’re going to be mentioned but I’ll do my best.

Let’s start with Contract Cloud, because I know that one specifically. If you wouldn’t mind, tell us what Contract Cloud is, why you were attracted to it. Let’s start with, did they pitch you? I’m assuming they did. I’d love to hear what that sounded like.

Contract Cloud is a really special company that is in the video agreement space. What happened was, I was at an event and I met this smart lawyer, young guy, and he was telling me that he had sat in the courtroom on many occasion and thought to himself, “Oh my god. This is a ridiculous, frivolous lawsuit. If we just had a little video of what happened at the contract signing or we had a little more evidence, we wouldn’t be here today.”

People who had sign mortgages and then later said, “Geez, I didn’t look at all the pages. I’m not responsible,” or “English is my second language and I didn’t understand this.” A variety of things that people will do in litigation. Listen, sometimes the people are right. But if you had some video evidence, we could change that.

TSP 081 | What VCs look for

What VCs look for: The reason I got excited about that company is you had somebody who had domain expertise.

The idea of Contract Cloud is that, at the end of the mortgage signing, you can confirm on video that, “Yes, I understand I’m getting a 7% loan. Yes, I understand …” or today, a 2.5% loan. “I understand that it’s a non-recourse loan and I understand what I’m signing today. I’ve had enough time to review it.”

What Contract has found since is that there’s lots of very interesting ways to apply video technology and video agreements and help both the consumers and the companies protect themselves and clarify their business relationships. The reason I got excited about that company is you had somebody who had domain expertise.

This guy, he’s a lawyer, Paul Vacquier, he’s a very smart guy and he was very passionate about the solution. It was a real problem. He had relationships with other people who are looking to solve the same problem. That was a fun company to get involved in. One of the first things we did is got Paul introduced to Amplify LA, which is one of LA’s leading venture accelerators. They did a lot to really help his company and take him to the next level. I’m going to see him later today.

[Tweet “What VCs look for: Show passion and why you are domain expert.”]

Fantastic. The big takeaways from what you just said Vince, for the listeners, is investors like you invest in the person that has domain expertise that is solving a real problem. That person’s expertise not just comes with smarts but comes with passion, which I really, really like that. All right, let’s jump into another one. Junkin Media. Am I pronouncing that right?

It’s Jukin Media.

Jukin, sorry.

I’m an adviser to that company. Gosh, this is one of the best cultures I’ve ever seen in a media company. Great leader, Jon Skogmo, the CEO. Lee Essner, the COO and president. These guys had just done a brilliant job. This is a company that is in the video business. They operate several businesses under the tent of Jukin Media.

Their real core business is identifying the most exciting videos online in platforms like YouTube and taking those videos and licensing them oftentimes along with the creators. Then making those videos available to TV morning shows, television productions and clip shows like Ridiculousness or Tosh 2.0, and that were their own very successful show, which is called World’s Funniest Fails on Fox TV.

TSP 081 | What VCs look for

What VCs look for: Their real core business is identifying the most exciting videos online and taking those videos and licensing them.

It’s just a very neat company that works in lots of ways. They got a television division that produces things and this licensing division. They work with marketers in a very special kind of handcrafted way to take this content and either use it as the messaging in ads. Got a great example, I’ll tell you in a sec. Or to advertise a site.

Here’s a fun example. There’s a viral video of a police officer, a trooper, probably in the northeast somewhere. I’m not exactly sure. Who in a snowstorm had skid it off into a snowbank. A guy came along in a Subaru and threw out a tow rope and pulled the police officer’s car out of the snowbank and back up onto the road. That was a video that Jukin licensed. Later, Subaru wanted to use for a commercial.

Oh, how fantastic.

They literally have tens of thousands of videos.

Right. This whole concept of curation is such a needed thing with the volume of every information that’s coming at us. Can you tell us how the founder found you, and what kind of pitch they gave to you that made you say this is the right team?

I had a relationship with Lee Essner, who’s an accomplished CEO. The guy’s been involved in early stage incubators ventures, he’s a super-talented M&A lawyer. I had been friends with him for several years and wanted to be involved in a project with him. As he had gotten involved in this company and he had needs over there, he asked me to come in and spend some time with them. That just grew into a consulting relationship for me, and a lot of fun also. It’s been a lot of fun for me.

One of the things that investors often ask founders when they’re pitching show people who are on an advisory board is how often is this adviser actually involve? Is it once a year? Is it once a quarter? Is it once a month? What is your typical involvement in these companies on a frequency basis? Or does it vary?

I’m involve. I think there’s really two types of advisers. I think this is very important point. There are advisers that as an entrepreneur, would be really important to have in your company because they establish certain credibility. There’s a marketing or marquee value to their name that’ll help other people in the industry. They’ll give you credibility and will help you in your relationships.

[Tweet “What VCs look for: Some advisors give you credibility and relationships.”]

That might be, if you’re an entrepreneur and you wanted to go disrupt the farm equipment industry and you got the former CEO of Jon Deere to be an adviser, that would be a major coup and you may be willing to give him some equity knowing that given their incredibly big life, that you may only get to talk to them for once a month on the phone and maybe see him twice a year or something like that. That might be a perfectly suitable advisory deal.

I think, when I’m talking to entrepreneurs and we’re building companies, if the fit’s right, you’re really like that person, you can really learn from, and you understand the marquee value of their name is what you’re buying a little bit with your equity. It’s okay to do a couple of those advisory roles. I’ve seen entire companies built on them. I don’t think that’s a very good idea. You have to be very strategic there.

TSP 081 | What VCs look for

What VCs look for: The other type of adviser is really the working adviser. That somebody that has a specific set of expertise that’s applicable to your company.

The other type of adviser is really the working adviser. That somebody that has a specific set of expertise that’s applicable to your company. I’m working with this really interesting young company, STEEZY Studios, that teaches people how to dance hip hop by introducing them to the hottest choreographers in the business and people can sign up and they can take classes. It’s a young company but really, really neat.

In a situation like that, music and licensing is important and technology is important and subscription marketing is important. With that type of company, I’ll work with the founders and we’ll make a list and say, “What are the things that we really need help on and how can we identify a hands-on adviser who would jump into this and love this company as much as we will,” and so forth. John, I’m not marquee value. I’m just a guy who is …

Oh, you are.

I’m really just a guy who has a lot of experience in the sales world, who really loves it and is delighted to have any of those conversations all the time. Hopefully, the companies that I advise are getting a lot of value from me and taking advantage of the fact that I’m always willing to talk about this stuff.

You said two things that I really want to underline for our listeners. One Vince, is, when you’re looking for an adviser, make sure that they love the company as much as you and the founders do. I think that’s so key. Obviously, when you get someone to invest in your company, you want them to be part of the culture and get excited.

The same is true for the adviser, they have to love it as much as you do so that everyone on the team, whether it’s someone who’s doing that job every day, an adviser or an investor, has the same passion for the vision.

[Tweet “What VCs look for: Look for advisers that love the company as much as you.”]

There’s something, John. You hear me talk about how I love these guys, I love this guy. But not everything’s perfect. I’ve worked with some companies that the founders are more short-sighted and they think creating a business is a little bit like packaging a movie. You get all the right names and somebody exits. It’s all great, super exciting. They try to biz dev the most exciting thing they can and build a lot of hype.

The industry points to some of those things. Industry conferences and some of the people in the industry try to maybe leave you with the impression that gosh, if you could just get these people in this venture funding and this thing, that you’re bound for an exit.

[Tweet “What VCs look for: Companies are hard and they take a long time to build.”]

The truth of the matter is, 99% of the time, these companies are hard and they take a long time to build. There’s a lot of valleys. The people that you get involved in your business, the reason why I say they have to love it is because those people, they’re going to be with you for a long time through a lot of stuff.

In fact, some of it lasts longer than some marriages. It’s ten years and the average marriage is over 7.2, unfortunately.

That’s interesting, but yeah. Gosh. We need an app to fix that.

Exactly, there you go. There’s a solution for every kind of problem. What advice would you have for our listeners on when they are pitching you or any other potential investor, not even an adviser, let’s say just an investor. What is something that you really look for when you hear a pitch?

I think, one of the first part is authenticity. I don’t want to be sold and BS-ed. The minute I think somebody’s overselling, it makes me uncomfortable because it’s a long partnership, it’s a long road we’re going down. I really want somebody to give me an honest assessment and not oversell me. That’s really important.

[Tweet “What VCs look for: Be authentic when you pitch.”]

Honestly, I see entrepreneurs make claims quite often and make me uncomfortable. I think they’re coached, “You got to have this big chart and go way up to the right and then this is what people react to.” If somebody comes to me and puts together a business plan and says, “Geez, we’re pre-revenue but we’re going to make $1.5 million next year and $19 million in the next year.” “I don’t know, man. How did you get there?”

You can’t over-exaggerate your projections. It’s all about, as you said, being authentic. What I think you’re saying is, I want to see someone’s logical thinking and that they have some experience or have some advisers that are giving them good information on, “That doesn’t makes sense to have that kind of growth.” It’s much more realistic, especially with you coming from a background in sales. You can probably spot when somebody’s pushing too hard.

[Tweet “Don’t exaggerate your projections”]

Just to continue the analogy a little bit of dating and marriage and relationships in general, the whole point of a pitch is to get the second date, not to get someone to open up their checkbook.

It’s great. It’s a great point. I’ve never written a check on the spot. I think there are people who do that. For the most part, it’s building a relationship and going down the road a little bit and figuring out what you can do. I think for me, if I want to have exposure to the venture innovation world, I invest as an LP in a couple of funds and that’s the way I get that exposure.

TSP 081 | What VCs look for

What VCs look for: For the most part, it’s building a relationship and going down the road a little bit and figuring out what you can do.

When I invest directly into a company, it’s because I also believe that I can benefit that company and be involved in a way that’s meaningful for all of us. That’s the way I work. I appreciate it when an entrepreneur says like, “Hey, do you have any interest in medical technology? What do you think about that?” I go, “Geez, I don’t know anything about cancer prevention, but if it was fitness, I might be kind of interested.” Then we can start the conversation there rather than take a whole pitch.

Also for young entrepreneurs, if you want to spend time with somebody, tell them exactly what you want to do. I know these people who want to meet me for coffee, “Hey, I want to pick your brain,” or “Want to come out?” Then I drive across town to go meet with them and then they want money.

It’s okay to want to have me invest but let’s have a really productive meeting. Tell me you’re interested in me investing, send me a copy of your executive summary. Let me tell you if it’s exciting to me at all and we’ll go from there.

Nobody appreciates the bait and switch.

I think sometimes people are uncomfortable to be that forward. It’s more helpful to all of us. By the way, if I’m not the person who’s interested in type of deal, maybe I can send it to somebody who is.

Exactly. That’s the whole key. Is if you build a relationship with somebody, they’re willing to let you into their network and that warm introduction is worth gold in the world. Is there any other company that you wanted to tell us about before, because a half hour just flies by with someone like you, that you’re excited about or want to give a shout out to or have as a great story that you think would be a great thing for our listeners to hear?

I mentioned STEEZY Studios. We’re early there, but that’s an exciting company. If you know anybody who likes dance or hip-hop, that’s totally great. You can go in and get a free account at STEEZY Studio and check that out. There’s some really great choreography there but also a dashboard that gets you into it and teaches dance in a way that you could never learn it on a YouTube or somewhere else. I’m excited about that.

Some of the bigger companies in Los Angeles are really killing it, like GumGum. They’re just doing great and they’ve really pioneered this whole field of in image advertising and they’ve innovated a lot of the advertising technology that’s unique. That’s a very fun company to watch in the future of Los Angeles.

TSP 081 | What VCs look for

For those YouTube influencers or people that have influence on platforms like Vine or Instagram, there’s opportunity to partner with FanBread.

FanBread, for those YouTube influencers or people that have influence on platforms like Vine or Instagram, there’s opportunity to partner with FanBread. FanBread can help monetize your audience off of those platforms on destination mobile sites with compelling content and commerce opportunities. That’s a new opportunity for those people who have developed audience and are just looking to monetize. That’s a very interesting company.

That’s fantastic. I like both of those a lot. Is there any other book besides Ignited, which we talked about, that you would recommend listeners to buy? Either about life or in the startup world?

TSP 081 | What VCs look for

The very specific nature of that book is focused on helping people in the middle understand the power they have.

First of all, Ignited is a book that I wrote based on my experience being a mid-level manager in major corporations. There’s a lot of leadership stuff in there. There’s some sales stuff in there. But the very specific nature of that book is focused on helping people in the middle understand the power they have in corporations by connecting the corporate vision to the real actualities of the work at the street level and levering themselves up in their organizations to create true and meaningful change.

That’s what that book’s about. That’s not right for every entrepreneur. It’s fantastic I think for middle managers. You can let me know. That’s the story there. I’m a lifelong learner, I’m always reading. I’m always digesting stuff in the space, sometimes it’s biographies. I recently read Elon Musk’s biography. I thought it was fantastic. I read The Everything Store about Bezos, I just really enjoyed that book. Peter Thiel’s book for startups is a fantastic book.

Those are great.

I’m just piling through the stuff. You pull some things out of each. Listen, one of the best books I ever read in my career is Stephen Covey’s 7 Habits of Highly Effective People. It’s a framework for building good relationships. It’s just good stuff for your life. 20 years later, 25 years later, I think about that book often. Probably really one of the most important books I’ve ever read.

Wow. Imagine leaving that kind of legacy as an author, how great. Vince, how can people follow you? What is your Twitter and all that good stuff?

I’m @VinceThompson at Twitter. I typically post stuff that’s just related to the technology innovation and ad community things. I don’t have a huge personal voice on that account. These things that I think are interesting to share to our folks. That’s it.

Fantastic. Of course, your consulting firm, Middleshift, is another place where people can, Middleshift.com, reach out to you. Vince, thanks again for bringing your enthusiasm and passion. I just can feel the energy coming through, which is so helpful for people to realize, that’s the level you need to be at when you’re talking to potential investors.

Thank you, John. I always love talking to you and look forward to catching up again soon.

My pleasure.

Links Mentioned

J Robinett Enterprises
John Livesay Funding Strategist
Middle Shift Website
Vince on LinkedIn
@vincethompson on Twitter
Ignited by Vince Thompson
Contract Cloud Website
Jukin Media Website
Steezy Website
Fan Bread Website
The 7 Habits of Highly Effective People by Stephen Covey

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